Comcast to sell Milwaukee-area Time Warner Cable system to Charter

Charter Communications senior systems technician Chad Wohlt works in West Bend Monday. Most Time Warner Cable subscribers in Wisconsin, including all in the metro Milwaukee area, will become customers of Charter Communications as part of a divestiture deal announced Monday. Credit: Mark Hoffman

It looks like most Time Warner Cable subscribers in Wisconsin are going to end up as Charter Communications customers after all.

Charter's bid to buy Time Warner Cable fell short in February, but now Comcast — which won that bidding war with an offer of $45.2 billion — plans to shed 3.9 million subscribers in an attempt to appease regulators and lawmakers concerned about its massive size.

Of those, 1.4 million nationwide will move to Charter, including all of the estimated 320,000 households that subscribe to Time Warner in the 10-county Milwaukee area. Time Warner is the dominant pay-TV provider in the region.

"The majority of Wisconsin customers will end up being Charter customers," said Charter spokesman Alex Dudley.

Dudley said the switch will include all services — video, Internet and phone.

"Everything you get from Time Warner, you will get from Charter," Dudley said.

Time Warner customers should not have to do anything to convert to Charter if the deal wins regulatory approval, he said. But, he said, "It is too early in the process to know what will and won't change once they become Charter customers."

Another 2.5 million Comcast subscribers will go to a new publicly traded company called SpinCo. Charter, based in Stamford, Conn., would own 33% of the company, with a pathway to eventually owning it all.

Comcast said the divestitures should help with the approval process for its merger with Time Warner Cable, while also improving the operating efficiency in each company's market area. The transactions will leave Comcast with about 30 million subscribers and fewer than 30% of homes that subscribe to cable or satellite TV in the U.S. Charter will become the nation's second-biggest cable provider, with 5.7 million subscribers, not including the SpinCo customers.

One thing likely to change is the number of cable jobs in the state, said Barry Orton, a University of Wisconsin-Madison telecommunications professor. Job reductions probably will occur, he said.

Time Warner Cable has about 2,000 employees in Wisconsin, including hundreds at its offices in Milwaukee and Appleton. Charter has 1,900 employees in the state, with large offices in Madison and Fond du Lac.

"You consolidate stuff," Orton said. "That's part of the reason you make these deals."

Complex transactions

Orton said he didn't foresee major changes for consumers.

"Rates are going to go up regardless," Orton said. "There's no factor here that makes rates go down or slow down in any way, shape or form."

He said there is some level of competition for cable companies, from AT&T's U-verse service and from satellite dish companies.

"But the reality is what drives the prices up largely is programming and the ridiculous amounts of money we give to actors, sports figures and directors and all those people," Orton said. "So that's not going to change, regardless."

Charter put the value of the acquisitions from Time Warner Cable at about $7.3 billion. The estimated value of the SpinCo transaction is $14.3 billion.

If regulators approve the Comcast takeover of Time Warner Cable as well as Monday's complex transactions, Charter would acquire Time Warner Cable systems in Ohio, Kentucky, Indiana and Alabama in addition to Wisconsin. Charter would divest systems in California, New England, Tennessee, Georgia, North Carolina, Texas, Oregon, Washington and Virginia markets.

Only one Wisconsin area now served by Comcast — Manitowoc — would become part of SpinCo, which would be managed by Charter.

SpinCo will own systems that are adjacent to Charter systems in Michigan, Minnesota, Indiana, Alabama, eastern Tennessee, Kentucky and Wisconsin. Orton said Comcast currently has a few systems on the western edge of Wisconsin in addition to Manitowoc.

"The transactions announced today will provide Charter with greater scale, growth opportunities and improved geographical rationalization of our cable systems, which in turn will drive value for shareholders and more effective customer service," Tom Rutledge, president and chief executive of Charter, said in a statement. "And through our meaningful ownership in and board representation at SpinCo, we can help it achieve similar market share growth in the markets it serves."

The Comcast-Time Warner Cable merger needs the approval of the Federal Communications Commission and U.S. Justice Department.

Wisconsin's utility regulator, the state Public Service Commission, has no role in reviewing the Comcast-Time Warner deal or the divestiture announced Monday, said Nathan Conrad, PSC spokesman.

Critics of the Comcast-Time Warner merger said they saw nothing in Monday's announcement that alleviated their concerns that the merger would create a company with too much power and that it would stifle competition.

"We've known from the day that the Comcast-Time Warner Cable deal was announced that Comcast intended to divest some subscribers, so this doesn't change anything," said Sen. Al Franken (D-Minn.). "The fact remains that Comcast will have unprecedented power in the television and broadband markets, and I'm very concerned that Comcast will use that power to squeeze competitors and consumers."

Consumers Union, the policy and advocacy division of Consumer Reports, has been consistently against the merger, and Monday's announcement didn't change that position.

"This is a very complicated deal, but it looks like Comcast and Charter are trying to carve up the marketplace to their benefit, and it's hard to see how any of this benefits consumers or competition," said Delara Derakhshani, policy counsel for Consumers Union, in an email.